Lyft IPO investors must have their head in the cloud to believe in this stock, says TimMullaney
With ride-hailing service Lyft having priced its initial public offering at $72 a share — valuing the company at $24 billion before its stock began trading on Friday with a big pop — there’s only one conclusion.Not the clouds — the cloud. The price, and the trade, only hold up if you see San Francisco-based Lyft LYFT, +11.74% as an heir to cloud computing companies like Salesforce.com CRM, +1.57% Rackspace, and of course Amazon.com AMZN, +0.
Lyft is a different bet than well-known, richly valued Web names. Amazon has stuck to its now decades-old formula of investing heavily, producing modest net income as equipment like cloud-computing servers are amortized but delivering killer cash flow. People do that if they’re convinced they are buying into a trend that will grow and grow, as new modes of business take market share from the old. That happened in e-commerce — though not enough to turn most non-Amazon online retailers into good stocks — and is happening now in enterprise computing.
Last year, tech consulting firm IDG estimated that 77% of enterprises had at least one application running on software it rented through a cloud-computing service, rather than code the enterprise owned and ran on its own servers. About 30% of computing dollars were spent on the cloud — but the 77% tells you that with companies experimenting with the cloud, many more the dollars will go there soon. Cisco Systems CSCO, +0.
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